Amazon, Berkshire Hathaway and JPMorgan Chase & Co. have formed a healthcare joint venture that aims to cut costs, boost transparency and provide an overall better experience for their employees. The only certainty is that this joint venture is likely to benefit Amazon Web Services.
Details about this venture are scant. As noted in the press release from the companies, specifics about the healthcare joint venture's management, headquarters and operations will "be communicated in due course."
It's also worth noting that the new venture will operate as a non-profit and focus on "technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost." Amazon CEO Jeff Bezos noted that success "is going to require talented experts, a beginner's mind, and a long-term orientation."
Toss in Berkshire Hathaway CEO Warren Buffett and JPMorgan Chase CEO Jamie Dimon and there are plenty of brains and capital around to make a healthcare splash. Keep in mind that the new joint venture is designed to benefit the three owners first and then maybe the rest of the U.S.
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Rest assured Amazon Web Services is likely to benefit and serve as part of the new venture's technology backbone. You can expect a healthy dose of artificial intelligence, machine learning and big data services to be in the mix. And yes, AWS is compliant with the various healthcare privacy regulations.
For sure, Amazon, Berkshire Hathaway and JPMorgan Chase & Co. are basically forming a group that can help their collective employees base. The subtext is that the venture will be a stake in the ground for large employers and employees facing rising healthcare costs. The projections from the Centers for Medicare and Medicaid Services are daunting. Through 2025:
- National health spending will grow at an average rate of 5.6 percent per year from 2016 to 2025.
- Health expenditures will grow 1.2 percentage points faster than Gross Domestic Product (GDP) from 2016 to 2025.
- Out-of-pocket spending growth will average 4.8 percent per year through 2016 to 2025.
Can this venture succeed? Perhaps. Amazon has a long history of having a beginners mind, learning a space and simplifying. Fulfillment By Amazon is one example. AWS is another example. Alexa, Echo and Prime also serve as examples. It's in Amazon's DNA to enter a market and learn. This new venture will be an excellent test bed for healthcare as a market and an industry.
Evercore ISI analyst Anthony DiClemente lays out an interesting take in research note:
Amazon's value proposition is around owning and interpreting deterministic data from its consumers. Though it is unclear how the data of this venture will be shared/utilized, it is not inconceivable that Amazon could potentially leverage it longer term to better navigate the complexities of the healthcare market. The company's direct access to the World's largest cloud computing infrastructure in AWS will be a key competitive advantage in addressing the massive data demands of the HC industry in a cost efficient way. Again this places AWS in a position where it can learn from new partnership and offer innovative cloud services to the healthcare industry at large, a massive market opportunity over the next several years.
Toss Amazon's partners and you round out economic and data expertise of the new venture.
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